Having only recently confirmed that a new ad-supported subscription tier is on the way, Netflix is apparently making rapid progress in putting it together. The company this week announced that Microsoft will serve as its “global advertising technology and sales partner”.
The video streaming giant’s co-CEO Ted Sarandos confirmed that ads are on the way last month, a few weeks after it saw its total number of subscribers fall for the first time in more than 10 years. For now, there’s still no word on when the cheaper tier will launch, or what Netflix will charge for it. All we do know is that it will cost less than the £5.99 that users pay for Netflix’s current lowest priced tier.
For existing users there’s nothing to fear. Unless they move to the new, cheaper plan, they won’t find their Netflix viewing sessions disrupted in any way. For those who do want to save some money, it’ll mean having to sit through the occasional ad.
Netflix Chief Operating Officer and Chief Product Officer Greg Peters said that Microsoft has a “proven ability” to support all of the company’s advertising needs as it works with it to build a new ad-supported offering. “More importantly, Microsoft offered the flexibility to innovate over time on both the technology and the sales side, as well as strong privacy protections for our members,” Peters added.
The news is probably more of a win for Microsoft than Netflix, given the potentially massive new audience it will be able to sell ads to. Microsoft President of Web Experiences Mikhail Parakhin explained that the new subscription tier will provide consumers with more options to access its award-winning content.
“Marketers looking to Microsoft for their advertising needs will have access to the Netflix audience and premium connected TV inventory,” he said. “All ads served on Netflix will be exclusively available through the Microsoft platform.”
The move to an ad-supported tier comes after Netflix lost 200,000 subscribers at the start of the year, having previously said it expected to add 2.5 million more. However, Netflix has faced competition from rival streaming services at a time when consumers are spending less amid economic uncertainty. What’s more, there’s worse to come, with Netflix likely to lose another two million subscribers between April and June.
Netflix hopes that by introducing a more affordable ad-supported tier, it will be able to reverse some of these losses.
The decision marks an about turn for the company, which for years had fiercely resisted the idea of allowing adverts on its platform. However, it clearly feels that it can no longer take what has really always been an ideological stance.
Netflix’s decision to work with Microsoft is not a surprise given the companies already share a number of ties, and will perhaps help to quash those persistent rumors that the company is looking to acquire Roku for its advertising platform.
